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tv   U.S. House of Representatives  CSPAN  October 4, 2011 5:00pm-8:00pm EDT

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the negative benefit to cost ratio of the bloomsburg flood protection project if we lose these jobs? what happens to this town this county, and my district if we lose 1,000 jobs? that's just one component to the bloomsburg project. this year, about 1/3 of the buildings in that town were flooded. 1/3 of an entire town. worse, the bloomsburg fair, one of the largest economic drivers for the town, the county and dozens of community and charity groups had to be canceled for the first time since the civil war due to the epic flooding. what happened to bloomsburg could have been prevented. the federal government dropped the ball. it failed to protect homes and businesses. we need to make sure that it doesn't happen again, not to bloomsburg and not to other communities along the river
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that need protection. sadly, for some of the people i've spoken with, flood protection will come too late. some of my constituents have told me they will not move back into their homes. the great flood of 2011 was just the latest in a long line of floods that they've had to endure. they're tired of picking up the pieces of their shattered lives. some were being in the process of brought out by the government. now they're in limbo. not sure whether to accept federal aid or if accepting help will jeopardize their pending buyouts. this congress needs to look at the buyout process. i feel it is too confusing, it takes too long and discourages people from trying to receive the help they need. mr. speaker, over the last several weeks i have seen terrible destruction and
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hardship endured by my constituents. but i've also seen tremendous good as neighbors help stricken neighbors, community groups banded together, charities mobilized quickly and effectively. in plumb out township, i -- plymouth township, i met with red cross volunteers to help people they've never met. in bloomsburg, i visited a local ministry that provided flood victims from everything from cleanup buckets to hot meals. church groups, scout troops, college clubs, sports teams, people from all across northern pennsylvania and beyond came together to support each other. the recent flood was a terrible disaster. but it also drought out the best in our -- brought out the best in our people.
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as i was driving through west piston, a small borough that was devastated by flooding, i saw a sign on a porch "the valley with a heart. thank you." my constituents were knocked down but not out. the people of northern pennsylvania are strong and resilient, but they need help from the federal government, and the federal government needs to help them. if they get that help, my neighbors will come back, stronger and better than before. i yield back the balance of my time. the speaker pro tempore: the gentleman yields back. does the gentleman have a motion to adjourn? mr. barletta: i do. the speaker pro tempore: the gentleman has made a motion to adjourn. the question is on the motion to adjourn. those in favor say aye. and those opposed, no. the ayes have it. the motion is adopted. according to the house standing adjourned -- the house stands
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adjourned until 10:00 a.m. tomorrow for morning hour debate. >> the government accountability office releases a report on the medicare system.
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all these events on the c-span tv networks. >> before the presidential election of 1916, charles hughes was a lawyer and professor, two-time governor of new york and though he lost his bid for the presidency, his impact on political history remained. serving as the post-war secretary of state and ultimately chief justice of the u.s. one of the 14 men featured in c-span's new weekly survivors. live from the supreme court building in washington, d.c.,, friday at 8:00 p.m. eastern. watch a number of videos about him at our special web site for the series, c-span.org /contenders. >> earlier today, president obama traveled to texas to
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deliver remarks urging congress to pass his jobs plan. he talked about budget cuts and teacher layoffs. this is 40 minutes. >> good afternoon. i know you are expecting the president. he'll be here shortly. my name is kimberly russell. in may of last year, i was laid off from my job as a social studies teacher at lincoln high school in dallas. the reason for my release was my position was being paid for by federal stimulus funding and the funding was exhausted. i have a family. i'm a single mother of a 10-year-old son and pride myself as being a homeowner. now that i'm unemployed, i'm struggling to keep that dream of home ownership alive. it is important that the job market for all americans improve
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immediately. [cheers and applause] >> i'm hoping that congress will pass the american jobs act to help teachers like me and others get back to work soon. [cheers and applause] >> i miss my students and my classroom. now, it is my privilege -- [cheers and applause] >> -- to present to you the president of the united states of america! barack obama! [cheers and applause]
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>> hello, dallas! thank you so much. thank you everybody. have a seat. have a seat! thank you. it's good to be back in texas! it is good to be back in texas. i am thrilled to have the opportunity to be with all of you. i want to thank a couple of people, the mayor of mesquite is here. and the mayor of dallas, mike
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rollings is in the house. and i want to thank the former mayor of dallas who is one of the best trade representatives this country has ever had, ron is in the house. [cheers and applause] >> i also want to thank -- i want to thank the folks over at the children's school who gave me a tour and i want to especially thank kim russell for sharing her story. thank you, kim. [applause] >> now, teachers like kim are why i came here today. teachers like kim and her former students. that's why i have been traveling all across this country for the last few weeks.
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these are the toughest times we have been through since the great depression. and because the problems that led to the recession weren't caused overnight, they won't be solved overnight. that's the hard truth. took us a decade to see the culmination of some of the bad ideas that had been put into place, the lack of regulation on wall street, middle-class folks struggling. so we aren't going to solve those problems overnight, but that does president mean we have to sit back and do nothing about this economy. there are steps we can take right now to put people back to work. there are steps we can take right now to put money in the pockets of working americans. there are things we can do right
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now to restore some of the security and fairness that has always defined this great country of ours. and that's what will happen if congress will finally get its act together and pass the american jobs act. [cheers and applause] >> it has now been three weeks since i sent this bill to congress. it's a detailed plan to get this economy moving. it's the kind of proposal that, in the past, democrats and republicans have supported. there's not been radical -- there's nothing radical in this proposal. these are the kinds of things in the past that we have had bipartisan support for. it's fully paid for. and that's why i need you to
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help me convince the people you sent to washington that it's time to pass this jobs bill and get america working again. [cheers and applause] >> now you just heard kim's story. there are teachers and educators like kim all over the country. i met a first grade teacher from minnesota at the white house, who was laid off after having been named the teacher of the year in her school district. her peers, students, determined she was the best teacher in her school district. she got laid off. there's a teacher in grand prarie, texas, who actually chose to resign in order to protect the job of a single mom who also taught at the school.
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think about that. here in dallas, all across the state of texas, you have seen too many teachers lose their jobs because of budget cuts. and thousands more could be at risk in the coming year. now, understand, this just doesn't hurt these teachers. it just doesn't hurt them and their families, it hurts our children. it undermines our future as a nation. if you've got kim, an a.p. teacher not in the classroom, those kids aren't going to have the same opportunities. and i want everybody to understand that what is at stake is nothing less than our ability to compete in this 21st century economy. i told the story a while back -- i was visiting south korea. and had lunch with the president there. and i asked the president, i
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said, what's your biggest challenge right now? he said my biggest challenge is our parents are way too demanding. he said they want -- they want their kid to learn english when they are in first grade. so, in addition to all the science and all the math classes, i'm now having to ship in teachers from outside the country just to teach our kids english. starting in elementary school, this is what the president of south korea said. they can't hire teachers fast enough. they call them nation builders. that's what they call teachers in south korea, nation builders, because they know educating their children is the best way to make sure their economy is growing, make sure that good jobs are locating there, making sure they have the sciences, the engineers and the technicians
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who can build things and ship them all around the world. that's what he understands. and the whole country supports him. here in america, we're laying off teachers in droves. it makes no sense. it has to stop. it has to stop. [cheers and applause] >> now, this bill will prevent up to 280,000 teachers from losing their jobs. [applause] >> this bill will support almost 40,000 jobs right here in the great state of texas. [cheers and applause] >> so here's what i need you to do. tell congress to pass this bill
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and put its teachers back in the classroom where they belong. [cheers and applause] >> it's not just teachers. tell congress to pass the american jobs act and there also will be funding to save the jobs of firefighters, police officers and first responders, who risk their lives to keep us safe. that is what happens if they pass this bill. [applause] >> pass this jobs bill and hundreds of thousands of unemployed construction workers will get back on the job rebuilding our schools, rebuilding our roads, rebuilding our bridges, rebuilding our ports, rebuilding our airports. the other day, i visited a busy bridge in ohio, between ohio and kentucky. speaker boehner, he's from ohio. republican leader mcconnell from kentucky. i thought it would be a good place to have an event.
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[laughter] >> this bridge is classified as functionally obsolete. that's a fancy way of saying, it's old and needs to be fixed. there is a public transit project in houston that would help clear up one of the worst areas of traffic in the country. there are schools all over this country that are literally falling apart. roof crumbling, rain dripping in , too hot in the summer, too cold in the winter, science labs all worn out, got a couple of beakers, and that's it. [laughter] >> built back in the 1950's, before the internet was invented. [laughter] >> that's an outrage.
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understand, america became an economic superpower in part because we had the best infrastructure. we built the transcontinental railroad, the hoover dam, grand central station. how can we sit back and now we are seeing china build better airports than us. europe, build better railroads than us. korea, more broadband access than us. at a time when millions of unemployed construction workers could be building all that stuff right here in the united states of america. my question to congress -- [applause] >> my question to congress is, what are you waiting for?
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the work is there to be done. there are workers ready to do it, contractors, they are begging for work. they'll come in on time under budget. interest rates have never been lower. it's time for us to put those folks to work and it's time to pass the america cang jobs act. pass this -- american jobs act. pass this bill! [applause] >> if congress passes this jobs bill, new companies will get new tax credits for hiring america's veterans. think about it. we ask these men and women to leave their families, disrupt their careers, risk their lives for our nation. the last thing they should ask to do is to fight for a job when they come home. [cheers and applause]
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>> tell congress pass this bill so we can help the people who create most of the new jobs in this country, america's small businesses. you know, folks, the other party likes to talk about creating jobs let's help america's job creators. let's do that. this provides tax cuts for every small business in america. if you hire a new employee or raise your worker's wages, don't just talk about helping job creators but help them by passing this bill! [cheers and applause] >> another reason why they need to pass this bill. on january 1, if nothing's done,
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everybody here is going to get a tax hike. [laughter] >> that's right. see, back in december, i got an agreement with the republicans to lower the payroll tax so that there would be more money in folks' pockets and we could protect ourselves against recession. since that time, we have had a tsunami in japan. we have had the arab spring, which shot up gas price. we have had problems in europe. and so the economy has gotten weaker. that tax cut is scheduled to expire by the end of this year. but if the american jobs act passes, the typical working family in texas will have an extra $1,400 in their pockets. [applause] >> if the bill doesn't pass,
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virtually every worker in america will see their taxes go up at the worst possible time. so i'm not about to let that happen. [applause] >> look, republicans say they are the party of tax cuts, tell them to prove it. tell them to fight just as hard for tax cuts for working americans as they do for the wealthiest americans. [cheers and applause] >> pass this bill! now what you'll hear from some of these folks is, well, we aren't going to support any new spending that's not paid for. all right. i agree with that. i think that's important. so i laid out a plan to pay for the american jobs act, and then
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some. a plan that not only pays for the bill to put folks back to work to raise our growth rate, but to also pay down more of our debt over time. it builds on the $1 trillion in spending cuts that i already signed this summer. making it one of the biggest spending cuts in history. so, look, i believe we have to make cuts in programs that don't work and things that aren't helping the economy grow so we can help pay for the things that are. we all believe that government needs to live within its means. we all agree with that. but we also believe that how you bring down the deficit is important. if we want to actually close the deficit, not just talk about closing the deficit, not just using it for a campaign slogan, not just playing politics, if we
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want to close the deficit, then you have to combine the tough cuts with a strategy that asks the wealthiest americans and the biggest corporations to do their part, to pay their fair share. [applause] >> look, i'm not telling anything you don't know. do you really think the tax code is written for you? [laughter] >> you think the tax code -- maybe you got a bunch of lobbyists in washington, and maybe you have special interests in the bam room trying to carve something out. i don't know. but most folks don't. so the tax code, the way it's structured is not fair. and so what we have said is,
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let's reform our tax code base odd a very simple principle. it will raise more money without hurting working families. here's the principle. middle-class families and working families should not pay higher tax rates than millionaires and billionaires. [cheers and applause] >> i don't know how you argue against that. seems pretty straightforward to me. warren buffetf's secretary shouldn't pay a higher tax rate than warren buffet,. when i point this out, it seems logical to me. but when i point this out, some of the republicans in congress, they say, you are engaging in class warfare. class warfare, let me tell you
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something. years ago, a great american had a different view, all right. i'm going to get the quote just so you know i'm not making this up. [laughter] >> great american said that he thought it was crazy that certain tax loopholes made it possible for millionaires to pay nothing while a bus driver was paying 10% of his salary, all right? you know who this -- who this guy was? wasn't a democrat. wasn't a crazy socialist. it was ronald reagan. it was ronald reagan. last time i checked, republicans all thought reagan made some sense. so the next time you hear one of those republicans in congress accusing you of class warfare,
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you just tell them, i'm with ronald reagan. i agree with ronald reagan that it's crazy that a bus driver pays a higher tax rate than a millionaire because of some loophole in the tax code. [cheers and applause] >> and by the way, i don't mean being called a warrior for the working class. you guys need somebody fighting for you. [applause] >> the only warfare i have been seeing is the war against middle-class families and their ability to get ahead in this economy. [someone shouting] >> let me make one last point. this is not about frying to
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punish success. this is the land of opportunity. and what's great about our country is our belief that anybody can succeed. you've got a good idea, go out there and start a new business. you've got a great product, you invepted something, i hope you make millions of dollars. we want to see more bill gates creating value and jobs. that's great. your current mayor did great work in the private sector, creating jobs, creating value. that's important. but remember nobody got there on their own. you know, i'm standing here today, michelle's standing here today -- michelle's not standing here today, but i know you wish she was, i'm standing here
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today, michelle -- we always remind ourselves the reason we have had this extraordinary opportunity is because somewhere along the line some teacher helped us. somewhere along the line, we got a student loan. we lived in a country that could move products and services everywhere. we live in a country where if there's a fire, someone comes in and puts out the fire. if you are burgla rised and someone is trying to come and solve the crime. i'm sure the mayor of dallas feels the same way. we're here because somebody laid the foundation for success. so the question is are we going to maintain that foundation and strengthen that foundation for the next generation and this is all about priorities.
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this is about choices. if we want to lower the deficit and put people back to work. if we want to invest in our future. if we want to have the best science, the best technology, the best research, we want to continue to be inventing new drugs to solve cancer and making sure that, you know, the new cars of the future, you know are running on electricity are made here in america, if we want to do all those things, then the money has to come from somewhere. i wish i could do it all for free. i wish -- i wish i could say to all of you, you don't have to pay any taxes and companies can keep all their stuff and rich people don't have to do anything and somehow, it all works out. but you know what? we tried it, and it didn't work.
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so now, you've got a choice. would you rather keep tax loopholes for big corporations that don't need it or would you rather put construction workers back to work rebuilding our schools, roads and bridges? [applause] >> would you rather i keep a tax break that i don't need and wasn't looking for, didn't ask for, and if i do don't have it, i won't miss it, or you want to put teachers like kim back to work and help small businesses and cut taxes for middle-class families? this is a choice that we've got to make. and i believe and i think you believe it's time we build an economy that creates good, solid
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middle-class jobs in this country and time to build an economy that honors the values of hard was and response -- hard work and responsibility. it's time to build an economy that lasts, not just based on speculation and financial she nan begans, but based on us making stuff and selling things to other people around the world instead of just importing from all around the world. that's the america i believe in. that's the america you believe in. and dallas, that starts now. that starts with your help. you know, yesterday, the republican majority leader in congress, eric cantor, said that right now he won't even let this jobs bill have a vote in the
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house of representatives. [crowd booing] >> this is what he said. won't even let it be debated. won't even give a chance to be debated on the floor of the house of representatives. think about that. i mean what's the problem? do they not have the time? [laughter] >> they just had a week off. is it inconvenient? look, i would like mr. cantor to come down here to dallas and explain what exactly in this jobs bill does he not believe in, what exactly is he opposed to. does he not believe in rebuilding america's roads and bridges? does he not believe in tax breaks for small businesses or efforts to help our veterans? mr. cantor should come down to
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dallas and look kim russell in the eye and tell her why she doesn't deserve to be back in the classroom doing what she loves, helping our kids. come tell her students why they don't deserve to have their teacher back. come tell dallas construction workers why they should be sitting by instead of out on the job, tell small business owners and workers in this community why you would rather defend tax breaks for folks who don't need them, for millionaires, rather than for tax cuts for middle-class families. and if he won't do that, at least put this jobs bill up for a vote so the entire country knows exactly where members of congress stand. [cheers and applause] >> put your cards on the table.
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i realize that some republicans in washington are resistant partly because i proposed it. [laughter] >> if i took their party platform and proposed it, they would suddenly be against it. we have had folks in congress who said they shouldn't pass this bill because it would give me a win. [laughter] >> they are thinking about the next election. they aren't thinking about folks who are hurting right now but thinking about how it's going to play in the next election. give me a win? give me a break. that's why folks are fed up with washington. they are worried about giving me a win.
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this is about giving people who are hurting a win. about giving small businesses a win and entrepreneurs a win and students a win and working families a win. it's about giving america a win! [cheers and applause] >> dallas, the next election is 13 months away. the american people don't have the luxury of waiting 13 months. a lot of folks are week living week to week, they need action on jobs and want it now and want congress to do what they were elect todd do and want congress to do their job. do your job, congress! i need you to lift up your voice, not just here in dallas, but anyone watching, anyone
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listening, anyone following on line, call, tweet and fax and visit and email your congressperson and tell them that time for gridlock and games is over. the time for action is now! tell them if you want to create jobs, pass this bill! if you want to put teachers back in the classroom, pass this bill! if you want construction workers back on the job, pass this bill! if you want tax cuts for the middle class and small business owners, pass this bill! you want to help some veterans? pass this bill! now's the time to act. we are not people who sit back in tough times. we step up in tough times. we make things happen in tough times. >> yeah. >> we are going to get through
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tougher times, but we are going to have to act. god help those who help themselves. we need to help ourselves right now. let's get together! let's get to work let's get busy and pass this bill! and making sure we are shaping a destiny and tell the entire world why the united states of america is the greatest nation on the planet. god bless you! god bless the united states of america! ♪
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♪ >> a look at our prime time schedules on the c-span networks. starting at 8:00 p.m. eastern here on c-span, new jersey governor holds a news conference to announce he won't run for president. on c-span2, government accountability office releases a report on the medicare system and prescription drug abuse and one hour earlier at 7:00 p.m. eastern on c-span3, members of the commission on wartime contracting testify on the amount of money lost due to waste, fraud and abuse. all of these events tonight on the c-span tv networks.
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>> before the presidential election of 1916, charles evans hughes was a lawyer and professor, two-term governor of new york and though he lost his bid for the presidency, his impact on political history remained, serving as the post-war secretary of state and ultimately chief justice of the u.s. one of the 14 men featured in the weekly series "the contenders." friday at 8:00 p.m. eastern. for a preview about hughes, watch a number of videos about him and our special web site about the series crsh span.org/ the contenders. >> congress is back in session and the house passed a spending bill that will keep the government funded through mid-november. the senate continues on a bill dealing with china's currency. watch live coverage on c-span and the senate on c-span 2 and use our comprehensive resource
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on congress to get more information about your elected officials. the c-span's congressional chronicle and every house and senate session, vote records, the daily schedules, committee hearings and more. washington your way. the c-span networks, created by cable, provided as a public service. >> watch more video of the candidates, see what political reporters are saying and track the latest campaign contributions with c-span's web site for 2012. it helps you navigate the political land cape with twitter feeds, candidate bios and polling data and links to c-span partners all at c-span.org/campaign2012. >> earlier today, federal reserve chairman ben bernanke gave his economic outlook before the joint deficit reduction
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committee and said the economy is close to fall tering and while the federal reserve is taking help, he urged congress to help as well. this is two hours, 10 minutes. >> the meeting will come to order. good morning everyone, i look forward to chairman bernanke's report on the state of the economy and perspective on recent actions taken by the federal reserve and insight into the short and long-term challenges facing this economy. my hope for today's hearing is to move beyond the partisan politics and finger-pointing that sometimes colors discussions about the federal reserve and what it should or should not do. instead, i think we should focus on the economic challenges
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facing the country and the potential solutions to those problems. all of us on this committee share a belief that congress needs to take action to bolster the economy and to help americans get back to work. similarly, monetary policy has an important role to play in strengthening our economy. millions of americans are still struggling in the wake of the great recession. the economy is not growing fast enough or adding enough jobs to make significant progress in reducing unemployment. just by way of example. 14 million americans are unemployed and six million are jobless, some 43% have been out of work for six months or more. second, private sector job creation, which had been well above 200,000 a month in february, march and april fell to less than 20,000 in august. state and local governments are
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realing as they lay off workers to meet a balanced budget requirement. in the past 12 months alone, state and local government payrolls have been slashed by 345,000. in my home state of pennsylvania, the unemployment rate, after declining to 7.4% in may has climbed with more than half a million people out of work. economic indicators also have been weakening abroad with financial conditions in the euro zone deteriorating, it is now a significant risk to the global economic outlook. the fed has used a variety of approaches to ease monetary policy. in the current economic environment, we need to use all available tools to support our economy in the short run. we also need to take the actions that will get our fiscal house in order in the medium and
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long-term. the two reinforce each other. getting our economy growing at a healthy pace is critical to sustain deficit reduction. as chairman bernanke observed to the economic club of minnesota, there is a.m. will room for government in the long-term, but in the absence of adequate demand from the private sector, a substantial, fiscal consolidation in the shorter term could add to the headwinds facing economic growth and hiring. the federal reserve act created the federal reserve system and established two objectives for the nation's monetary policy, maximum employment and stable prices. this is what is commonly referred to as the fed's dual mandate, and the federal reserve's announcement that it
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will ease monetary policy further is consistent with that dual mandate. the federal open market committee said it will purchase $400 billion of long-term treasury securities and pay for those securities by selling an equal amount of shorter term government debt. in this so-called operation twist, the fed is not expanding its portfolio but shifting its competition so the average maturity of its holdings is longer. the goal is to bring long-term interest rates further, reducing borrowing costs for businesses and consumers, sparking additional economic activity and ultimately boosting employment. the fed afffirmed it will pay close attention to inflation and inflation expectations. some in washington have called on the fed, to, quote, resist further extraordinary intervention in the u.s.
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economy, unquote. arguing that action by the fed could further harm the u.s. economy. i disagree. with so many americans out of work and with g.d.p. growth having slowed to less than half of 1%, first half of this year, additional actions are needed to strengthen the economy. let me say a word before i conclude about an issue that's in front of the senate right now. currency as it relates to china. this problem has had substantial harmful impact on the u.s. economy and american jobs. a recent report by the economic policy institute finds the u.s. deficit with china caused in part by china has cost our economy 2.8 million jobs over the past decade. chairman bernanke in testimony before this committee in april of 2010 noted that, quote, most
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economists agree that the chinese currency is undervalued and used to promote an export committee, unquote. and he said it would be good for the chinese to allow more flexibility in their exchange rate, unquote, and that, quote, we should continue to press for a more flexible exchange rate, unquote. i agree with those statements by the chairman. this week, the senate has the opportunity to take action in response to china's unfair trade practices when we vote on bipartisan legislation to crack down at long last on china's currency manipulation. last night the senate passed the first procedural hurdle with a strong bipartisan vote to move forward with debate on the legislation. so to sum up briefly, more than two years after the recovery officially began, our economy remains very vulnerable.
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unemployment is stuck above 9%. and long-term unemployment remains at near record levels. we need to use every weapon in our arsenal to support a stronger economic recovery. chairman bernanke, thank you for being here today. thank you for your testimony you are about to give in a few moments and i look forward to working with you and others to make sure we can focus on the economy, creating jobs. chairman brady. >> i welcome you. clouds are gathering. economic growth is nearly stagnant. 6.8 million fewer payroll jobs today than when the recession began in september of 2007. according to economists, recoveries from financial crises are weak and vulnerable to external shock that may trigger double-dip recession.
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republican members of congress recognized it. we are critical of the president's expensive economic policies and failed to go spur job growth and restore business and consumer confidence, but they have left america susceptible to a double-dip recession. america faces a growing risk from the european debt crises. i'm very concerned about the effects of this on american financial institutions in markets as well as the broader economy. i'm anxious to hear your comments. in response to the financial panic, the federal reserve took extraordinary action to stabilize u.s. financial institutions and markets during the fall of 2008. many of these actions were necessary and proper. instead of rehashing the past, i would like to initiate a
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discussion on the framework for monetary policy in the future. an economist said, if you want a certain policy outcome you have to use the right policy lever. too many policy makers are ignoring his wisdom. monetary policy affects prices. in contrast, budget, tax and regulatory policies affect real output and jobs, while the great contraction from august of 1929 to march of 1933 proved that bad monetary policy can shrink production and destroy jobs, good monetary policy cannot accelerate economic growth or foster job creation except in a short-term. congress affects business production and job investment through its tax and regulatory policy. if the prospects for a swelling federal debt, higher taxes and additional costs from the president's health care plan as well as burdensome regulation
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are detering entrepreneurs from investing in building new equipment and software and hiring workers there is little that the federal reserve can do to overcome this drag. federal reserve's mandate regarding monetary policy was to provide an alasic currency. the growth act known informally as the humphrey-hawkins act was enacted. it imposed a dual price stability and full employment. since 1978, many countries examined what a central bank should do and have opted for a single mandate for long-term price stability. the european monetary union and 13 other major developing countries have had mandates for price stability as the sole goal or primary goal with the subordination of other goals for their central banks.
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australia and canada have similar mandates. the time has come for congress to reconsider the federal reserve's mandate. in my view, the dual mandate should be replaced with the single mandate for long-term price stability. i will introduce legislation to make this change in the future. while a single mandate means maximizing employment is unimportant, history proves the best way for the federal reserve to maximize employment is to achieve long-term price stability. federal reserve would announce an inflation target. the federal reserve would retain independence from both congress and the president to achieve that target. while i may criticize certain actions, i want to be clear. the federal reserve must remain independent and free from any undue political pressure in implementing monetary policy.
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congress should reconsider the federal reserve lender of last resort policy. i remain deeply concerned regarding clearly insolvent institutions, freddie mac and fannie mae. 1913 envisioned the federal reserve would act as a lender of last resort. however the federal reserve has not articulated a clear policy. as one observed, the absence of a lender of last resort has three consequences. first, uncertainty increases. second, troubled firms have a stronger insent tive and ask congress or the administration for support or to press through the federal reserve or other agencies to save them from failure. and repeated rescues encurge banks to increase leverage. this is the moral hazard problem. end of quote. if the federal reserve to
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promulgate a clear statement about its lender of last resort policy, it would go far to diminish uncertainty, reduce the likelihood of political interventions and mitigate the moral hazard problem. finally, many years ago, congress gave exchange rate policy to the secretary of the treasury. this is the bretton woods policy. and by controlling the money supply it affects the foreign exchange value of the u.s. dollar. swings in exchange rate influence domestic price, thus, responsibility for exchange rate policy should be moved from the secretary of treasury to the federal reserve. chairman bernanke, i look forward to your system and the questions that follow. i yield back. >> chairman bernanke, i would provide a brief introduction. . . dr. bernanke serbs as chairman
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of the federal open market committee, the system's principal monetary policymaking body he took office as chairman on february 1, 2006, when he also began a 14-year term as a member of the board. dr. bernanke was chairman of the president's council of economic advisors from june, 2005, to january of 2006, prior to beginning public service, he was a chaired professor at princeton university and he has been a professor of economics and public affairs at princeton since 1985. dr. bernanke, it's good to have you here. >> thank you. chairman casey, vice chairman brady and other members of the committee, i appreciate this opportunity to discuss the economic outlook and recent monetary policy actions. it's been three years sin the beginning of the most intense phase of the financial crisis in the late summer and fall of
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2008 and more than two years since the recovery began in june of 2009. there have been some positive developments. the functioning of financial markets and the banking system in the united states has improved significantly. manufacturing production in the u.s. has risen 15%, driven substantially by growth in exports. indeed, the u.s. trade deficit has been notably lower recently than it was before the crisis, reflecting in part the improved competitiveness of goods and services. business investment in equipment and software has continued to expand and productivity gains in some industries has been impressive. nevertheless, it is clear that recovery from the crisis has been much less robust than we had hoped. recent revigs of government economic data show the recession was even deeper and the recovery weaker than previously estimated. indeed, by the second quarter of this year, the latest
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quarter for which figures are available,ing a cat -- aggregate output in the united states had not returned to the level it had attained before the congress. this has led to slow increase in jobs and household incomes. the pattern of sluggish growth was particularly evident in the first half of this year with real g.d.p. estimated to have increased at an average annual rate of less than 1%. some of this can be attributed to temporary factors. earlier this year, political unrest in the middle east and north africa, strong growth in emerging market economies, contributed to significant increases to oil and other commodities which affects consumer purchasing power and spending and the disaster in japan disrupted production particularly in the automobile industry. with commodity prices having come off their highs and problems with the supply chains
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well along in the resolution, growth in the second half of the year seems likely to be more rapid than in the first half. however the incoming data suggests that other, more persistent factors continue to restrain the pace of recovery. consequently, the federal market committee, f.o.m.c., expects a slower pace of economic growth than at the time of the june meeting when committee participants most recently submitted their forecasts. consumer behavior has both reflected and contributed to the slow pace of recovery. households have been cautious in their spending digs as declines in house prices and the value of financial assets have reduced household wealth and many families continue to struggle with high debt burdens or reduced access to credit. probably the most significant factor in consumer confidence has been the poor performance of the job market. over the summer, private payrolls rose by only about
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100,000 jobs per month on average, half of the rate posted earlier this year. meanwhile, state and local governments have continued to shed jobs as they have been doing for more than two years. with these weak gains in employment, the unemployment rate has held close to 9% since early this year. moreover, recent indicator, including new claims for unemployment point to the likelihood of more sluggish growth in the period ahead. other sectors of the economy are also contributing to the slower than expected rate of expansion. the housing sector has been a significant driver of recovery for most recessions in the united states since world war ii. this time, however, a numb of factors, including the overhang of distressed and foreclosed properties, tight credit conditions for builders an potential home buyers an the large number of under water mortgages have left the new rate of home construction at only about 1/3 of its average
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level in recent decades. in the financial sphere, as i noted, banking and financial conditions in the united states have improved significantly since the depths of the crisis. nonetheless, financial stresses persist. credit remains tight for many households, small businesses and residential and commercial builders, in part because weaker balance sheets and income prospects have increased the perceived credit risk of many potential borrowers. we have also seen bouts of elevated volatility in risk markets, partly in reaction to fiscal concerns here and abroad. domestically, the controversy during the summer regarding the raising of the federal debt ceiling and the downgrade of the u.s. long-term credit rating contributed to the financial turbulence that occurred at that time. outside the united states, concerns about sovereign debt in greece and other ewe roe zone countries, as well as about the sovereign debt exposures of the european
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banking system, have been a significant source of stress in global financial markets. european leaders are strongly committed to addressing these issues but the need to obtain agreement among a large number of countries to put in place the necessary back stops and to address the sources of the fiscal problems has slowed the process of finding solutions. it is difficult to judge how much these financial strains have affected u.s. economic activity thus far. there seems little doubt that they have hurt household and business confidence and they pose ongoing risk to growth. another factor likely to weigh on the u.s. recovery is the increasing drag being deperted by the government sector. notably, state and local governments continue to tighten their belts by cutting spending in the face of ongoing budget pressures while the federal course of the fiscal policy remains uncertain. to be sure, fiscal policymakers face a complex situation. i would submit that in setting
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tax and spending policies for now and the future, policymakers should consider at least four key objectives. one crucial objective is to achieve long-run fiscal sustainability. the federal budget is clearly not on a sustainable path at present. the joint select committee on deficit reduction formed as part of the budget control act is charged with achieving $1.5 trillion in additional deficit reduction over the next 10 years on top of the spending caps enacted this summer. accomplishing that goal would be a substantial step. however, more will be needed to achieve fiscal sustainability. a second important objective is to avoid fiscal actions that could impede the ongoing economic recovery. these two objectives are not incompatible with putting in a plan that does not preclude implications of fiscal choices in the near term. third, fiscal pl i -- policy
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should aim to promote long-term growth and economic opportunity. as a nation, we need to -- fourth there is evident need to improve the process for making long-term budget decisions, to prodict greater clarity while avoiding disruptions. in some the nation faces fundamental difficult choices can -- which cannot be safely or responsibly postponed. let me turn now to the prospects for inflation. prices of many commodities, notably oil, increased sharply earlier this year and as i noted, led to higher retail gasoline and -- higher retail, gasoline, and food prices. other goods and services were able to pass through some of these input costs to their customers. separately, the global supply
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disruptions associated with the disaster in japan put upward pressure on prices of motor vehicles. as a result of these influences, inflation picked up in the first half of this year. over that period, the price index rose at an annual rate of about 3.5%, compared with an average of less than 1.5% over the preceding two years. as the -- as was anticipated, inflation has begun to moderate as the transer to influences wane. in particular, the prices of oil and many other commodities have leveled off or come down from their highs and the step up in automobile production has started to reduce the pressures on the prices of cars and light trucks. importantly, the higher rate of inflation experienced so far this year does not appear to have become ingrained in our economy. longer term inflation expecting as have remained stable according to surveys of household and economic forecasters. the five-year measure of
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inflation derifed from yields on nominal and inflation proteched securities suggests that inflation expectations may have moved lower recently. in addition to the stability of longer term inflation expecting as, a substantial amount of resource slack in u.s. labor and product markets should continue to restrain inflationary measures. in view of the deterioration in the economic outlook over the medium run, the fomc has taken steps to provide additional policy accommodation. at the august meeting the committee provided greater clarity for the level of short-term interest rates by noting that economic conditions were likely to warrant exceptionally low levels at least through mid 2013. at the meeting in september, they announced they were going to increase the average securities in the portfolio. it intends to purchase by june,
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2012, $400 billion of securities with remaining matures of six years to 30 years and sell those with remaining mature -- remaining securities with maturities of three years or less, leaving the size of the balance sheet unchanged this should put downward pressure on long-term interest rates and be more supportive of economic growth than they would otherwise have been. the committee also announced in september that it will begin reinvesting principal payments on agency debt and agency mortgage backed securities into agency mortgage backed securities rather than into long-term treasury securities. by helping support mortgage markets, this action should contribute to a stronger economic recovery. the committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability. monetary policy can be a powerful tool but it is not a
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panacea for the problems currently facing the u.s. economy. fostering healthy job growth and job -- economic growth and job creation is a shared responsibility of all economic policymakers in close cooperation with the private sector. fiscal policies of critical importance, as i noted today, but a wide range of other policies pertaining to lay por markets, housing and regulation, for example, also have important roles to play. for our part, we at the federal reserve will continue to work to help create an environment that provides the greatest possible economic opportunity for all americans. thank you. i'd be happy to take your questions. >> mr. chairman, thank you very much. i want to note for the record that member statements will be made part of the record and i ask unanimous consent that they all be made part of the record. without objection. mr. chairman, i want to start with -- close to where you left off, with regard to the
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maturity extension program. i'm looking at the top of page 6 of your testimony when you say, in pertinent part, quote, the fed intends to, quote, purchase by the end of june, 2012, $400 billion of treasury securities with remaining maturities of six to 30 years and to sell an equal amount of treasury securities with remaining maturities of three years or less, leaving the size our balance sheet approximately unchanged. unquote. that's described as the maturity extension program. i have two questions on that. number one is, as a result of the implementation of that policy, how much of a decline in long-term interest rates would you expect? >> well, we would expect something on the order of 20 basis points, approximately. we see this as being roughly, approximately equal to a
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50-basis point cut in the rate. it's a significant step but not a game changer. >> in terms of the intended or hoped for economic boost from that, what's your sense of that? how can you assess that? >> well, we think this is a meaningful but not an enormous support to the economy. i think it will provide additional monetary policy accommodation. it should help somewhat on job creation and growth. it's particularly important now that the economy is close, the recovery is close to faltering. we need to make sure the recovery continues and doesn't drop back and the unemployment rate continues to fall downward. i don't have a precise number but i would just put, as a moderate support, not something that is expected to radically change the picture, but should be helpful both in keeping prices fear the price stability level but also providing support for growth. >> i may have some follow-ups
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with that, but i want to move to the question of currency, which happens to be a front -- a major issue and front burner issue for us this week. i want to read you a statement that you made, going back into 2006, this is the speech, a part of a speech you made at the chinese academy of social sciences in december of 2006. i'm quoting. greater scope for market forces to determine the value of the r&b would reduce an important distortion in the chinese economy, namely the effective subsidy that an undervalued currency provides for chinese firms that focus on exporting rather than producing for the domestic market. a decrease in this effective subsidy would induce more firms to gear production toward the
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home market, benefiting domestic consumers and firms, unquote. i read that to you just by way of reminder about things you have said about currency. and when i talk to people in pennsylvania, and beyond, but especially back home, there is a unanimity about this issue that is pretty rare across regional party lines in terms of the reality for people's lives, the adverse impact that china currency policies have had on our jobs and our communities. and i guess one question i wanted to ask you, and if you can, i guess you can answer the first one, the other two may be more difficult to answer, but as the -- has the fed attempted to quantify the magnitude of the impact of this subsidy on the u.s. economy or the -- or
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u.s. jobs? has there been a recent attempt to do that? >> no, i don't think so. we have mostly followed work by the i.m.f. and other international agencies, which do find, and also by think tanks, you know, like the institute for international economics, which have found that the chinese currency is undervalued by a significant amount, the exact amount varies according to estimates. >> do you have any sense of the aggregate number of jobs lost that you could attribute to this policy? >> i don't have a number. it's difficult to estimate because there are many direct as well as indirect effects. working through third, you know, third party, other trading nations and so on, i think right now, a concern is that the chinese currency policy is blocking what might be a more normal recovery
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process in the global economy. in particular, we have now a two-speed recovery where advanced industrial countries like the united states and europe are growing very, very slowly, where emerging market economies are growing quite quickly and a more balanced retvry would have more demand shifted away from emerging markets to the more industrial economies, the chinese economy is blocking that process so it is to some extent hurting the recovery process. it certainly is a negative. i'm sorry, i don't have an exact number. >> thank you very much. vice chairman brady? >> thank you, chairman. as often as not, a country that undergoes a severe financial crisis, as america did, fall into a double dip recession within the first two or three years afterwards. given that america's economy is not flying at -- not flying strong and steady at 50,000 feet but flying low and slow
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today and given ex-pe shower in money market accounts to europe, do you have any concern that the turbulence from a financial crisis in europe could trigger a double dip recession here at home? >> i have concerns about the european situation. i should say first that we have looked carefully at bank exposures, both to foreign sovereigns and to foreign banks, and in particular the exposures of u.s. banks to the most troubled sovereigns, portugal, ireland, and greece, is quite minimal. so the direct exposures there are not large. there are somewhat larger exposures in the money market mutual fund area, but they have moved mostly away from portugal, ireland, and greece to the other european countries like france and germany. it isn't so much the direct exposures that concern me. rather, as we've seen in the last few days, it's been evident, market uncertainty about the resolution of the
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greek situation, about the broader resolution of both the sovereign debt issues and the european banking issues, has created an enormous amount of uncertainty and volatility in financial markets and it's through that volatility and indirect effect that we're being affected now. i believe that one of the reasons our recovery has been slower this year than it was last year is that we've faced a lot of financial volatility and some of that is coming from the european situation. >> if there is a liquidity run on european banks, what tools are you considering to mitigate to limit the adverse economic effects on the united states? >> well, first, in europe, there are substantial facilities to provide liquidity to european banks. first the european central bank has enormous capacity to provide liquidity to european banks. we have conducted a swap line with the european central bank
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they give us ewe roes, we give them dollars and on their own response lt and credit risk they relend dollars as necessary to european banks that need dollars. we are doing what we can to cooperate with ethe european central bank and other central banks to provide dollar funding for global dollar money markets. that's the first thing. domestically, i think our main lines of defense would be to make sure that there is first adequate supervision of our banks, which we are very much engaged in, and i would have to say that the good news is that u.s. banks have substantially increased their financial basis since the crisis three years ago, but second, we would make sure we stand ready to provide as much liquidity against collateral as needed, as lender of last resort for our banking system. you -- congressman you mentioned earlier, the lender of last resort policy regarding ample i.g. and other individual firms and i basically agree with you and just note that
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dodd-frank has made that illegal, we could not do that again. we are not allowed to do any lending to individual firls or to insolvent firms. what we could do is provide, with the permission of the secretary of the treasury, is proride a broad-based lending program to try to address a run on our financial system, which we do not anticipate but we will certainly be prepared to respond if anything eveverage waits. >> i think the question is raised again because of europe. it's difficult to ascertain the difference between liquidity and insolvency. without a clear lender of last resort policy in advance, it lends itself to uncertainty. can i ask you, are there other tools you are considering other than the swap lines, creating liquidity with the european central bank, any other tools you're looking at should that crisis occur? >> our basing tools other than those are, again, our
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supervision and oversight and monitoring of our own financial system and we are looking at, broadly, the financial system not just the banks as part of our responsibilities under the new legislation and secondly, standing ready as central banks always have in financial crises to provide back stop liquidity as necessary. >> can you answer me this, we have just a short time left but you've been reading the papers, as i have, there is some concern that the swap lines with the european central bank create, in effect a back door bailout to european banks and leave exposure for u.s. taxpayers. we have had swap lines in the past, my understanding is that this lending is to the e.c.b., not the banks themselves, but can you address the authority and potential exposure that might occur? >> you said it right, congressman. the authority is given to the federal market committee by the
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congress and has been used many times in the past, no question about the authority but in terms of ex-pe shower -- exposure, as you say, our loan, it's not a loan, it's a swap. what we're doing is swapping dollars for ewe roes with the ewe -- for euros with the european central bank. we have a contract with the european central bank that they'll return to us the full amount of dollars, plus interest, we give them, we do not face any exchange rate risk or any interest rate risk. moreover, they take -- they make the loans to their own banks, about which they have appropriate information and if there are any losses, they are responsible, not us. taxpayers are under no risk whatsoever through these swap lines, which by the way proved very, very helpful in the 2008 crisis. >> thank you, chairman. i yield back. >> senator sanders? >> thank you for pg here, mr.
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bernanke. let me start with a question coming from a slightly different direction. i think most americans perceive today that the middle class is collapsing, poverty is increasing, real unemployment, as you know, is about 16%, 25 million people without jobs or underemployed. and yet at the same time, we have growing inequality, income and wealth inequality in america, top 1% earn more income than the bottom 12%. the wealthiest 400 people own more wealth than the bottom 150 million americans. that gap is the greatest of any major country on earth. do you believe that this economy will recover, as long as we continue to have this growing gap between the very, very rich and everybody elsewhere some people have so much and so many people have so lit snl are you concerned about that issue? >> i'm concerned, senator, i've spoken on this issue. it's not a recent development,
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it's been happening since at least the late 1970's, that inequality has been increasing and at the top, in particular, there's increased income. there's a variety of reasons for it. i don't necessarily know that the short-term recovery of the economy is crucially tied to it, though it would help to have broader based purchasing power throughout the economy. i certainly agree that it's a real concern and that, you know, it's something that we should try to address as a society. >> in a similar vein, let me ask you this. today we have on wall street the sixth largest -- the six largest financial institutions have assets equal to more than 60% of the g.d.p. are you concerned that after we went through the disaster of too big to fail a few years ago that with that type of concentration of ownership where three of the largest institutions are bigger than they were before we went through the bailout, are you
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concerned we'll be in a position again where congress will have to bail out these financial institutions, who have not changed their ways, who are still into highly speculative activities, and b, are you concerned when you have so much concentration of ownership in these top institutions, that this does not create in any way, shape, or form a come -- a competitive, dynamic economy? >> we very much supported the reforms in the dodd-frank act, which are intended to eliminate or at least substantially reduce the too big to fail problem. as i was saying to congressman brady, we no longer have the authority, at the federal reserve to bail out anybody. and you know, it's our anticipation that congress will never bail anybody out, we have put in extra authority. >> i'm not quite so confident that that reality may not come again. here's my question, when you have six financial institutions
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with that much economic power, why shouldn't we break them up? do you believe that an institution is too big to fail, it should be allowed to continue in why not break them up, provide more competitive aspects to the economy? >> the authority is there if we determine that they present a grave threat to the economy. >> do you believe -- if you were sitting where we were, would you be supportive of breaking up the large financial institutions? >> i think i would look and see how the market works here. there are benefits to size. the 60% of g.d.p. you mentioned is much smaller than many other countries that have banks bigger than their g.d.p. i think the right response is to put extra cost, extra supervision on these firms that will give them an incentive to eliminate unnecessary size an unnecessary actity -- activities and that's what dodd-frank attempts to do. >> my last question is this, i
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secured a position in dodd-frank which you were not too enthusiastic about which allowed for an audit of the fed in the financial crisis. what we learned is that the fed provided in a revolving way, some $16 trillion in low interest loans to every financial institution in this country, many of the central banks throughout the world, many large corporations in america, many very wealthy individuals. my question is this, at a time when large banks have parked over $1 trillion at the fed, why aren't we doing the same, providing low-interest loans to small businesses, that they can create jobs? if you during the financial crisis provided $16 trillion to banks all over this world, why are you not providing the kinds of money that small businesses now desperately need so they can expand and create jobs? >> first arks you pointed out, this is resolving.
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many of these loans were overnight and over and over again. the federal reserve was created in 1913 to address financial panics. like all central banks around the world, for 300 year the way we do that is provide back stop liquidity in a panic when financial institutions lose their funding. it is very much in the interest of the broader economy and the average person that we prevent the collapse of the financial system. it is not our role and we do not have the authority to make general loans to the broader -- >> but you do have the authority, some would disagree whether you should have the authority to deal with unemployment. unemployment is the situation now. why aren't you doing for small businesses what you did for large financial institutions? >> we are addressing unemployment. i addressed the aggressive steps we're taking to ease monetary policy. >> are you prepared to provide low interest loans to small businesses in the same way you did to large institutions around the world?
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>> i don't think that's our role and i don't think we have the authority to do that. >> representative campbell. >> thank you, mr. chairman. chairman bernanke. i'd like to follow up on what vice chairman brady was talking about on the european situation. with all the issues relative to our economy, we have some modicum of control, you and us up here, of monetary policy and fiscal policy, but i think one of the frustrations is that we don't have any control over europe's decisions relative to their current problems and crises, but yet it can affect us here. to what extent would a default in greece or in some of the other countries, where those -- where that sovereign debt has some -- holders of that sovereign debt have some loss is our financial system sufficiently protected from that, that that -- that a default in greece and perhaps another country over there
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would not impact our financial system, at least? >> well, first it would depend the conditions of the default. if it were done in a way that was, where there were very substantial firewalls, back stops, protections, done in an orderly and controlled way, that would be one thing. if it was disorderly, unplanned and disruptive that would be a very different matter. as i said to congressman brady, the direct exposures of our banks to greece are minimal. but if there were a disorderly default, which led to, for example, runs or defaults of other sovereigns or stresses on european banks, it would create a huge amount of financial volatility demrobally that would have a definite impact on our economy so it's a very, very serious risk if that were to happen. that's why it's extremely important that the europeans continue along the lines they
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have been on, which is to try to address that situation. >> i understand that, as you say, if it affects their economy and demand is reduced, that obviously affects the global economy and there's not that much, i would perceive, and if you disagree, say so, that we can do about that. but are there -- you obviously are taking all the steps you believe you can and that are prudent in order to create a firewall around our financial sector, is there anything we should be doing in that regard, meaning congress? >> unfortunately, as you pointed out at the beginning, we are kind of innocent bystanders here. we the federal reserve, the treasury and others, have, you know, been consulting with and been kept informed by our european colleagues. i am persuaded that they are very much aware of the risks you know, associated with the situation. they are committed to trying to address it.
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the problems there are not really economic. they are essentially political. what they are trying to do is find solutions that will be acceptable to 17 different countries, which as you can imagine is very difficult. so i don't have any good suggestions other than to support their efforts and to continue to push them to move aggressively to put this behind us. even the current situation of just ongoing uncertainty has been, i think, a negative for our economy. >> switching gears for a moment, you mention housing, which i agree is one of the primary elements of the economy that we cannot grow without housing, cannot grow robustly without housing being part of that and we never go into recession without them being part of that, what can or should we be doing at this point to aid that sector of the economy specifically? should we be looking at a new system of housing finance past
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fannie and fred tea to replace fannie and fred key as they currently exist? should we be looking at the foreclosure situation? what are your thoughts on that? >> this is an important issue. i urge congress to look carefully at what might be done. there are a lot of possibilities, one issue is the treatment of real estate owned, reform e.o., one is the overhang in foreclosed and distressed properties, would they allow r.e.o. to be converted to rental or rent-to-own, some way to manage that r.e.o. overhang. the second is refinancing, there are barriers to refinancing, including the fact that people who are under water have difficulty refinancing, would it be possible to help that happen? you mention fannie and freddie, i think for the near term it would be difficult to create a full-fledged alternative to fannie and freddie who are currently now the base exsource of all securitization in the mortgage market but to the
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extent that congress is able to lay out a clear framework or clear path to a new housing finance system, i think that would create some certainty and allow some of the private sector securitization activities to resume. so i think there are some things that could be done and i know you have a special interest in this area, i would urge you to think about what congress could do. >> thank you, mr. chairman. >> thanks, representative campbell. senator klobucher. >> chairman bernanke, i know you were in my state recently and spoke there, i think you saw the strong and vibrant business community in our state. it is a community that works together well, it's one of the reasons we have an unemployment rate that's two points better than the national average. it's a state that tends to believe in making things and inventing things and exporting to the world. you can imagine the frustration our business community has felt by some of the games going on in washington recently. i was thinking back to the last year that you testified, when
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you were talking tissue talking about how, this is -- talking about how, this is a year ago, the markets were signaling confidence in our system to deliver a sustainable fiscal trajectory. what do you think about how that was handled, even how it was handled last yeek, i think it's something "the new york times" called "governing by crisis," they talked about how each of these confrontations have high cost, they add uncertainty to the fntsrble system and contribute to a cynicism and lack of confidence in the political system, that damages emp. i would like your opinion on how things have been handled in the last six months and how that has been inconsistent or consistent with the goals you have laid out today. >> senator, first let me just say that i strongly support efforts to put our fiscal policy back on a long-term, sustainable path. i in no way -- i'm in no way
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putting down that very important objective. that being said, unfortunately, the brinksmanship of the summer and the, at least the perception in the minds of some investors that the united states might actively consider defaulting on its debt and moreover the possibility that it might be recurring periodically, i think was a negative for the financial markets. it was the reason that the downgrade occurred. the s&p cited the political process more than the amount of debt outstanding an it's really -- there's no way to run a railroad if i may say so. so i very much support continued, strong, bipartisan efforts to bring our long-term fiscal situation under control. i do honestly submit to you that, and sincerely submit to you that doing it in a way that raises the risk of default on
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our debt is going to be counterproductive. eventually it will lead to higher interest rates which will make deficits worse which goes against the purpose of the exercise. >> i was wanting to know, senator coats and senator warner, one of 37 senators, bipartisan group, that said we need to reach the $4 trillion figure in debt reduction. i believe we need to do that with a balanced approach that we need to do it with a mix of spending cuts, which are very important as you pointed out, but also closing loopholes to enable us to bring down the corporate tax rate, leading to one of your other goals of sustainable growth, as well as looking at fairness issues that senator sanders has addressed. do you see it as possible moving forward with this $4 trillion debt reduction by doing it in a balanced way? >> it's up to congress exactly how you'd like to do it. i laid out some goals. one is to achieve the sustainability, that can be done with a larger size government or a smaller government, depends on what you
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want the government to do. but i hope that as you think about -- let me put it this way. as you think about reducing our deficits and putting us on a sustainable path which is critically important, it's important to think about how good is our tax system? how efficient and how effective is it? how equitable is it? how effective is our government spending? is it producing the results we want? sit supporting growth in recovery? so we should continue to think about the components of the budget swell the overall need for sustainability. >> thank you. one last thing i've appreciated that you've talked about in some way, the need to focus on the country's competitiveness and innovation. i saw a recent survey in my state that 46% of businesses can't find workers to serve in certain jobs. our tech schools have a placement rate, they're not
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your grandfather's tech schools, i wonder if you can talk about, you mentioned exports are so important, but the need to retool our work force that should be a major piece of our competitive agenda. >> this is where many of our exports are, now, either in specialized, high tech capital goods or professional services, for example. and so, developing both the human capital, the expertise and skills, and making sure that we retain our global leadership and development, i think those are incredibly important for productivity and living standards going forward. >> thank you very much, i appreciate you being here. >> thank you, senator. representative burgess. >> thank you, mr. chairman. picking up on what senator klobuchar just said a brief commercial, the food and drug administration is undergoing a re-authorization process next
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year, it will be tough because it's a political year as well, but it's critical, our ability for the approval of new medical devices is something where we're severely insufficient to this country, we're driving that business overseas, that investment overseas, at the same time, under the affordable care kt a, we'll be taxing that segment of our intellectual capital and i think it's unconscionable the way we behave. we hear a lot of talk about the $1 trillion sitting on the sidelines that corporations have, $1 trillion they're waiting to see what's going to happen is that accurate? >> i think it's more like $2 trillion. >> what is it they're waiting to see? >> well, partly it's liquidity preference from the crisis, you know, where they want to make sure they have enough cash on hand in case there are more financial issues. >> are those capital rirptes you have imposed? ? i'm talking about corporations,
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not about banks. corporations, i remain very, i think, uncertain about the strength of the recovery. at this point, they are able to meet demand with their existing capital stocks and work forces and they're looking to see a stronger recovery and greater clarity before they deploy some of those funds. >> is that greater clarity from the legislative branch? or from the federal reserve? or from the executive branch? where is that coming from? >> it comes from many areas. i think first and foremost, will the recovery continue and be strong or will it falter? there's a lot of uncertainty about what the economy is going to do. certainly, policy uncertainty is an important issue. as far as the federal reserve is concerned, we in our regulatory efforts are doing our best to move as quickly as possible to, and -- to provide clarity about the regulatory framework we're responsible
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for. >> do you think tax policy influences it? >> it's possible, yes. in general, again, the more clarity we can provide to firms and households, the more likely they are to make commit. s of various sorts. >> let me ask you a question, i need to move on, time is limited, do you think that the actions taken in the last three years have prevented a recurrence of the events we saw in september of 2008? have we prevented the next meltdown? >> i think we made a substantial improvement. >> wrong answer. have we prevented -- it's a yes or no question. >> if we had not taken those actions we wouldn't have had to prevent. >> many people talk about glass-steagall, you mention moral hazard, do we immediate to draw that bright line again? >> gong gas steagall per se would have avoided the crisis. many investment banks or commercial banks that are --
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that have problems. i think we made a lot of progress in getting our financial sector on a stable footing. >> you said the committee will continue to monitor economic developments and is prepared to take further action. do you have other arrows in your quiver at this point? have most of them been used? is the only arrow you have left the printing press? >> well, the basic tool that the federal reserve has is operations in the open market that may or may not increase the money supply. but the attempts to reduce interest rates and to create more financial accommodation, we do have tools but obviously we want to evaluate the costs and benefits of any digs we take an make sure that, you know, the economy is getting the appropriate amount of
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stimulus from us. >> so the answer is, the printing press may be the only arrow left in your quiver? >> i think that's an unfair characterization. the printing press is not actually involved. what we're doing right now, for example, is selling short-term securities and buying long-term securities. we're not changing the size of the balance sheet and not changing the sthifes money supply. >> as long as it works. let me ask you asking un-- something unrelated because my time is running out. you see protests on the right and the left. right now the protests getting the headlines are on the left in new york. what does that protest say to you? what are you hearing if that activity in new york right now? >> well, i would say generally, i think people are quite unhappy with the state of the economy and what's happening, they blame, with some justification, the problems in the financial sector for getting us into this mess. they're dissatisfied with the policy response here in
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washington. at some level, i can't blame them. certainly, 9% unemployment and very slow growth is not a good situation. that's what they're protesting. >> and are you incorporating that into the remedies you're proposing? >> i'm taking into account the growth rate and the unemployment rate as well as the inflation rate. i'm not take the protests into account specifically. i certainly, like everyone else, i'm dissatisfied with what the economy is doing right now. >> thank you, mr. chairman. >> thank you, representative burgess. representative hinchey. >> thank you very much. thanks for being here. thanks for all the responsibilities that you're engaged in. i've got a couple of simple questions to ask, one which expands upon what mr. sanders said a few minutes ago. the distribution of wealth, we have a serious issue with distribution of wealth in this country and that really needs
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to be taken care of. it needs to be addressed and straightened out. the top 1% of americans hold 33% of the total wealth in this country. the top 5% hold nearly 60% of the total wealth, the top 10% hold 72% of the total wealth. the bottom 50% of americans hold only 3% of the total wealth. that is a similarity and reminiscent to the deep collapse in the economy which our country suffered back in the 1930's. that needs to be overcome. so, can you tell me, candidly, what accounts for this significant concentration of wealth in this country and in your opinion, what is the most effective, the most effective initiative that congress can do to increase household wealth among the working and middle class? the working and middle class are the drivers of the economy of this country.
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when the working and middle class have situations that decline, the general economy goes down. that's what we've got to concentrate on. working people. building them up. making them more successful. >> in the shorter term, clearly it's people with the middle class but also the working class who take the brunt of high unemployment. so you know, the federal reserve is taking strong actions to try to restore economic growth and try to bring down the unemployment rate. that would be an important step to take. in the longer term, there are a number of reasons for this inequality, which as i pointed out to senator sanders is not a new phenomenon, it's been growing for 30 or 40 years. a lot of it has to do with divergent ex-al and skill levels and we have more diversity in terms of high quality and low quality situations in the u.s. than almost any other industrial country and we need stronger
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and more consistent training and education for everybody. we need to make sure that people have technical skills because technological change is where people are getting left behind. we need to help people learn to save and budget. financial literacy is an important issue. people have talked about trade, senator casey mentioned the chinese currency issue, i think we need to have open and fair trade that would be helpful. so the variety of things that can be done to try to do that, many of them unfortunately don't happen overnight. broadly speaking, i think we all agree that we want to create as much opportunity as possible and when there are people who don't have access to good education, they're shut out from the beginning. >> i would suggest, some of the things that you can do, to recommend to this operation here, we can do the positive things and the concentration of wealth was handled very, very specifically back in 1977,
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1978, back in that particular period of time. dramatic cuts for the taxes for wealthy people. that in and of itself has to be dealt with and a whole host of other things need to be dealt with and can be dealt with effectively by this operation here to upgrade the quality of middle income people that needs to be done. let me ask a little bit about the soker rule. since the passage of todd-frank, the federal reserve -- of dodd-frank, the federal reserve has been working on implementing the volcker rule. it limits the ability to engage in proprietary trading. it upholds the idea of the glass-steagall act. recently news reports have indicated that a draft final rule will include a significant loophole, allowing banks to continue to make risky bets with their own capital to hedge
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against portfolio risks. we have one indication here about specific banks that have allocated specific rules about $2.7 billion. with their own capital a hedge against portfolio risk, that's what they're doing this new exception significantly diminishes the impact of the volcker rule. how can we expect to see a change in bank behavior if we continue to allow proprior tie trading through a watered down volcker rule? >> well, first let me say we're about to put out a proposed rule, i would say within a couple of weeks we should have something out that the public can look at and give us comments on it. it's a complicated rule, we want to make sure it's workable, but at the same time we want to follow the spirit of the statute. there are in the statute provisions that allow banks to hedge their positions which is something you want them to do
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because that reduces risk. i'm not sure i know exactly what you're referring to but i assure you we will look carefully and respond to any comments you may have about the actual rule when it comes out. >> with regard to the volcker rule, it's been weakened. there's been a lot of provisions in there that have been run down. are we going to continue to allow it to be run down? or are we going to do something to correct that run downing and make it more effective, as it was before? >> i don't know what you mean by run down. the rule that's about -- is about to be put out. if you see the rule, tell us what your objections or concerns are. >> you can see clearly what it means by run down, i think. >> i don't know if you're referring to current activities by the financial institutions, of course the volcker rule is not in effect yet. it will take some time before it's in effect. it's our intention to follow the spirit of the rule. after all, chairman volcker was chaurm of the federal reserve. i look at his picture every
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day. so we will certainly try to make sure that the spirit of the rule is enforced. >> thank you very much. >> thank you, representative hinchey. senator koets. >> thank you, mr. chairman. mr. chairman, thank you for your service. both sides of the financial houses here, the congress and the fed face significant challenge. we're both is sort of on the hot seat, don't think it's appropriate for one to blame the other for the problem and you haven't done that. seems to me sometimes too much attention is focused on what the fed should do, when it's not within the fed's purview of doing, it's in ours and we're deflecting the blame other to you. nevertheless, you indicate in your opening statement here that, and i quote, future
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course of federal fiscal policies remains quite uncertain. and that uncertainty is something we all hear as we go back to our states and talk to businesses an others, it is pervasive. throughout industries, throughout business, throughout households. i guess the question is, how can we, together, work to eliminate some of that uncertainty and restore confidence, not only in the investment market but in the consumer market. clearly that would have a positive impact in terms of our going forward. you outline four key objectives in that regard in your statement. and one of which is, as you describe, putting together long-term, fiscally sustainable, credible plan. you state that what is before the congress in terms of what has been done in august and what the goals are for the
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supercommittee that's going to report in november are far short of what we need to do. that's reinforced by the rating agency, by the president, it's been reinforced by various economists and analysts, saying, generally, anything short of $4 trillion in spending, viable spending cuts over a 10-year period of time is going to be inadequate to regain that confidence and achieve the goal of a fiscally sustainable plan. my question to you is, as others have suggested, you can't get there just -- to get that kind of plan, just through spending cuts. you need certain reforms in the system. one of which is entitlement reforms to mandatory spending and another is comprehensive tax reform. my question is, how important is that to be part of a package that can be deemed, what you would conclude to be long-term,
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fiscally sustainable, and credible? do you have some comments and thoughts on that? >> yes. so first, it would be a major achievement to have a credible plan that delivered stability and sustainability over the next decade and the numbers you gave, i think the number the c.b.o. and others have given as well, but as i was indicating, for example, to senator klobuchar, the quality of the product also matters, not just the bottom line numbers, in terms of both economic efficiency and growth and in terps of certainty, reforming the tax code, for example, would be useful and valuable. i think everybody agrees it's a complex and in many ways counterproductive system right now. likewise, evaluating the quality of our programs, is it possible, for example, deliver health care to senior citizens at the same level or the same quality for less cost?
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those are some issues that we need to address. i agree the bottom line number is critical, so is whether or not we achieve clarity and improvement in both the tax and spending programs. >> some say this is not, putting that comprehensive package together by the end of this year, congress voting on that and pushing it forward is not attainable, particularly in regards to the complexity of the entitlement reform and the tax reform. in many -- and many suggest that, well, these are elements, these are initiatives that ought to be started up in 2013. can we wait until then? >> well, senator, you're a better judge than i am of how quickly this can be tone in congress but clearly the sooner, the better. 2013 is a ways away. at least giving some indication of the directions that you're going and the broad ideas you would be incorporating would be helpful. >> you state in your comments
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here that these difficult and fundamental fiscal choices cannot be safely or responsibly postponed. i assume you stand by that. >> yes, sir. >> in 2013, would that fall in that, would you describe that as something that is safely and responsibly done? >> i would like to see, i think we would all like to see, as much progress as possible. if that involves, now, laying out some plans and beginning the discussion, i think that would be useful. >> my own belief is that at least some strong indication with some enforcement mechanism is necessary in that package now in order to ensure the investment world and consumer world we are on the right path and therefore have the psychological effect of improving confidence and helping move forward with some sustainable. thanks for your testimony. .
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>> as difficult it is for two southerners to talk about anything for two minute -- in five minutes, i'll do my best to be blunt. you came to our committee and gave much they have same
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we see the european central bank behind the debt of greece an the interest of greece is 40%. if investors use confidence, the feds' actions won't have any effect on that
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>> my last question is this. we are operating now in an environment where inflation is above your target rate. unemployment is above everybody's target rate. dealing with those two situations would, some would say, require two different things. it takes one thing to solve inflation, that would make unemployment worse, or you can solve inflation to make employment worse. the stability, what the fed is supposed to provide, would you
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better -- be better positioned to provide clarity and stability if we remove one of your two mandates? >> it's a good question. we do have some ability to improve employment situation and the duel mandate has worked pretty well on average over time. i would also point out that central banks that have inflation as their primary or technically only mandate do pay attention to economic conditions if for no other reason that that affects inflation expectations. so i think our dual mandate is workable. although i agree that in the long run, the only thing the fed can control sin flation and in the long run low inflation is the best thing we can do for growth. , so my bottom line is i think we can make the dual mandate work. i think it's worked pretty well. but of course it's up to congress, if you want to change to a single mandate, we will do whatever you assign us to do. >> thank you, sir. >> thank you, representative mulvaney. representative duffy.
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>> thank you. and thank you for coming in, mr. chairman. i appreciate your testimony. i talk to a lot of folks who are studying what's happening in greece. many of them will say it's kind of a foregone conclusion, that greece is going to default. i know you're not going to say that. but as we look here, i think your testimony today is basically saying we don't have primary exposure to greece or italy. but we do have secondary exposure through the banking system. how great is that exposure? >> well, again, our banks have the minute muss exposure to the sovereign debt of portugal, ireland and greece. they have quite modest exposure to the sovereign debt of italy and spain. they have much more substantial exposure to the banking systems of italy, spain, france and of
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course very substantial exposure to the economies, more broadly speaking. so the direct exposures to say greece are quite small but indirectly to the continent and more generally through the stability of the financial markets overall, of course, we have significant exposure. >> and we see that i think you've indicated it's pretty clear what the europeans have to do to stave off this crisis. it's not an issue of do they know what to do, it's do they have the political will to actually step forward and do what's necessary. do you think they're doing enough? do you think they have the political will to get the job done? >> i think they pretty much how much is at stake. it's not just short-term stability. it's the continuation of their common european project, the continuation of their common currency. so i think there's a very strong desire and will to achieve success here. but, again, the process has been slowed by the political
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complexities. >> and i think it's analogous to what we see here. we have a situation in this country where we look out into the future and you go, listen, we're down the road going to have some serious swhoose our debt. and we'll all sit around these tables and we have bipartisan discussions but there's not a political will to get it done and when we have our own conversations today about our debt, where we sit at $14.5 trillion, and it's pretty tough to get a political consensus to deal with it, do you think it gets more politically easier to deal with the debt when it's 10 years down the road and -- $25 trillion? the more debt we rack up, the more politically difficult it get, doesn't it? >> it's a very -- i have great sympathy for you. these are very, very difficult problems. they involve very fundamental questions what have the government should do and how big it should be. and i understand that there's an enormous amount of disagreement and i hope that we'll be able to find a common ground. >> but looking at what we see in greece, do you say it's fair
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that the alarm bells are going off with regard to american debt? >> well, that's -- two sides to that. on the one side, clearly, as mr. mulvaney pointed out, we've got flight to quality coming into u.s. debt. people seeing all kinds of problems in the global financial system, they're buying u.s. debt and driving yield to the u.s. debt down to very low levels. that being said, i think everybody appreciates now that you can't run large deficits forever. we're seeing that in other countries. and in fact, you know, s&p 500 downgraded the u.s. treasuries so clearly this is an issue that we have to address and it's not something that can wait 10 years. >> i want to quickly pivot to operation twist. you are in the process of selling our short-term treasuries, $400 billion, and going to purchase long-term treasuries. are you doing a market value to market value or are you going
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market value to power value? >> it's going to be par to par which means the market values are not going to exactly match. >> is this going to be a minor qe-3 that's going to happen through these purchases? >> it's possible that the value of the securities holdings may change be but very small and not significant in terms of stimulative effect. >> the last time we chatted, in a hearing over the summer, you'd indicated you were considering qe-3 is that still on the table as one of your tools that you may use? >> we never take anything off the table. because we don't know where the economy's going to go. we can't forecast, you know, what might happen in the future. but we have no immediate plans to do anything like that. >> i yield back. >> thank you, representative duffy. senator lee. >> thank you. thank you, chairman kasey, and vice chairman brady. i don't want to make a lengthy statement. i'm far more interested in your testimony. but i do want to share just a couple of my own thoughts about
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the current state of our economy. and share some of my concerns about the federal reserve system. in 1977 congress gave the federal reserve the dual mandate that representative mulvaney referred to, to promote both maximum employment and simultaneously promote stable prices. unfortunately since that time and more recently just in the last few years, we've had anything but maximum employment and stable prices. most americans believe correctly i think that prices of products and services they buy on a daily basis, things like gasoline, electricity, heating oil, health care services, have increased significantly in recent years. and have grown more volatile. and at the same time we have unemployment in excess of 9% and a lot of americans as a result of those facters are struggling in this difficult economy. so, the result of that in my view, the federal reserve may well be said to be failing in
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its congressional mandate, two fold mandate that was just described, and i wonder whether some auction ought to be taken to remedy that or at least to bring the mandate more into line with reality. i would add that i'm troubled by the federal reserve's role in shoring up failing banks. some would say bailing out, others would say shoring up or engaging in some form of swaps. but regardless of what they're doing, they're arguably creating asset bubbles through policies that lead to artificially low interest rates and the general veil of secrecy under which the federal reserve typically operates is also of concern to me. so, with some of those concerns in mind, i want to ask you a couple of questions. given that many of america's retirees, including the baby boom generation getting ready to retire, those saving for
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retirement often invest in fixed income products, including a lot of treasury securities. are you concerned about the implications of these historically low interest rates on retirees and those saving for retirement? >> can i please reply quickly to your earlier statement? >> feel free. >> on inflation. inflation has come down over the last 30 years and during my tenure it's been about 2% which is essentially price stability. so i think the record on price stability has been very, very good, actually, according to b.l.s. statistics. on unemployment i would blame the current crisis mostly on the financial crisis. obviously the fed had some responsibility there. but it wasn't in my opinion coming from the dual mandate. it came from a financial oversight issue. a we're not bailing anybody out. all central banks have a responsibility to provide backstop liquidity to solvent
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institutions only. fully collateralized. we do not lose any money, we don't take any risk. this is what central banks do to try to reduce financial stress and to help the economy. as far as fed audits, we are very thoroughly audited at this point and i would refer everyone to our website which has an f -- f.a.q. as the fed audited. we are audited by the g.a.o., by the inspector general, by outside private accountants. we produce regular financial statements, all of our emergency lending facilities have been thoroughly audited, nobody's found any impropriety whatsoever. so that's really just an urban legend. thanks for letting me respond to that. on the saving issue, it's a very difficult question. i guess one consolation for treasury holders is of course they've had a lot of capital gains as interest rates have gone down. but more seriously than that, you know, i understand that fixed income savers do often
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suffer from low interest rates. it's a consideration, it's something we think about. but clearly if you're going to be investing in the u.s. economy, you need a strong economy and it's our view that the low interest rates over a period of time, not permanently, help the economy recover, help have a stronger economy going forward and that gives better opportunities for investment for all savers. and so ultimately i think the short-term low rates are necessary to give the kind of economy we need that people can get ultimately high returns in. >> what do you expect interest rates to do over the next few years? or maybe i should direct it more specifically toward treasury yield rates. where do you expect those to go in the next five or six years? >> well, depends very much on how the economy evolves. if the economy recovers gradually as we currently anticipate, then over time treasury rates will go up. >> i see my time's expired. thank you, chairman.
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>> thank you, senator lee. . >> thank you, senator kasey. and thank you, mr. chairman. thank you for your service to our country. it's a very difficult time. i appreciate your calmness through the storm here. over the past three years the federal reserve has engaged in what seems to me like unprecedented action and originally these actions were aimed at managing a financial crisis. as a lender of last resort. and we clearly were in crisis. but the fed has continued to expand its balance sheet, mull approximately -- multiple rounds of quantitative easing, ex potential -- exponential increase in monetary supply relative to the growth of the economy. and you in effect become a major player in the private sector economy. much beyond banking. but a major economic player.
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my question is, if you had a single mandate of just protecting the value of the dollar itself, how much of the actions that you've taken in the last three years would change if you did not have the mandate of protecting employment? because this may be the way we want it to be, but it does seem , when you combine congressional and executive policies with what the fed has done in the markets, that it's getting to where the private sector players do not know what to expect from government. how much of that would change if you did not have a mandate to increase employment? >> well, at certain times there would be a difference in policy, certainly. but in this case, as i've mentioned, our forecast for inflation is that it will be somewhere around 2% next year,
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which is pretty close to what most central banks around the world, even those that have only a single mandate, define as price stability. our second round of quantitative easing, last august in 2010, was in response to an inflation rate that was below 1% and falling and we were concerned about the risk of deflation. so the efforts just to keep inflation close to sort of the 2% target, the fact that it's close to 2% now suggests we would have had to do most of what we've already done just to keep inflation there. so all the things we've done have not driven the inflation above the price stability level. >> are you concerned that we're setting the stage to happen? in effect it does seem that the dollar is ok for now because the euro is in such bad shape. and as you've said before in testimony that you understand as the economy grows you're going to have to withdraw the
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stimulus effect of monetary supply. is this something we can really control at this point? i think the monetary supply continues to increase dramatically. the federal reserve is brought through intermediate yares a significant amount of our -- intermediaries a significant amount of our debt is this something we can come back and control? and is that much control a good thing? >> senator, first the monetary base which is the reserves, the banks hold with the fed, has grown tremendously, reflectinged size of our balance sheet. but the money supply that most americans think about, currency and circulation, checking accounts, those things, has not grown unusually, first. but secondly, as week of discussed on a number of occasions, we provided this exit strategy in the june minutes, we have a number of -- number of tools for exiting. we're confident that on a technical level we can do so and we'll be paying very careful attention to inflation as we make that determination.
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so i assure you that we are quite confident that we can reverse our policies when necessary. >> thank you, mr. chairman. thank you, senator kasey. >> we'll move to a second round of questioning now. they will be something approaching a lightning round. three minutes. >> it's good to have a list of good news items. i was looking at page one by my count there's at least four. maybe five pending on how you break them up. but the functioning of financial markets and the banking system improve significantly, that's one you mentioned. manufacturing production has risen 15%. the trade deficit is noticeably lower. notably lower, i should say, in your testimony.
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business investment and equipment in infrastructure -- or equipment in software has continued to expand in productivity gains in some industries have been impressive. so that's some good news. but when you get to the point in your testimony where you have the four objectives, which again i think are helpful for us, number one, long-term fiscal sustainability, number two, avoiding action that could impede a recovery. third, the fiscal policy aim should be on long-term gregget and then, four, improving the process of how we do things around here. >> i wanted to focus on the long-term fiscal sustainability which has been your focus appropriately so. you also say that we need short-term strategies as well. one of the -- one of the strategies put in place back in december of 2010 was the payroll tax cut for the employee and now there's a
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debate about the next step to take, whether or not weather we extend that or whether there's a cut put in place for the employer. i guess other than a strategy like that or maybe even extending unemployment insurance benefits, that's one that's on the table as well, not that you want to have a long menu but any other short-term strategies that you think would be helpful? >> excuse me, i made reference to housing as an area where there might be various steps that could be taken to make the market work better. in terms of growth, considering investments in capital, whether it's public capital or supporting private capital formation or human capital formation is one possibility. the unemployed obviously is a major area of concern, perhaps assistance can be provided
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there. but on the tax side, a couple of people have mentioned tax reform and that would be something to look at that could provide more certainty and a more effective and efficient tax system going forward. those are just some ideas. obviously i'm not endorsing specific policies and i have no concerns about the creativity of your colleagues in finding strategies to work on. >> thank you. vice chairman brady. >> thank you, i'm pleasantly pleased to get a second round so we'll do a lightning round with you, chairman, if that's ok. transparency is a major issue with the fed. we hear critics today. my experience to you is you've been an advocate for transparency, through the financial crisis, both in meetings here and in our meetings face to face as well. to that end is there any
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logistical reason why the lag time between open markets committee meetings and the release of crypts -- transcripts shouldn't be reduced from five years to two years or less? is there a reason we can't see that sooner? >> there's no logistical reason. my concern is that two years is within a tightening or easing cycle. what we noticed when the transcripts were released with a five-year lag was that the meetings became much more constrained, people started reading their statements. there was much less give and take. with that lag, you're going to inhibit discussion and you may have adverse impacts on markets. we provide a great deal of information in our minutes, in our testimonies, and speeches and the like and i of course am happy to meet with you and discuss issues that you might have. i think no other central bank in the world provides the transcripts with any lag as far as i know. so this is actually quite a transparent policy that we have and i do think it would create problems to shorten that
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considerably. >> in china there's a focus on surn -- currency but noting that the u.s. devalued its currency by a peak of about 15% over two years, it's now closer to 12% today, isn't and since the driver behind the currency legislation seems to be our trade deficit, what i hear from our businesses is that while currency still isn't s an issue especially for select industries, there are a number of trade barriers we fates in -- we face in china from theft of int property rights, closed capital account restrictions on raw and rare export materials, on and on, choosing of national champions, on and on. if congress is to tackle our trade deficit with china, isn't it more important that we look at the whole range of trade barriers that restrict our sales into that growing market? >> on our currency, congressman, the dollar is
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about the same place it was in the summer of 2008. it's going up and down with flows of flight to safety. but not -- hasn't really been on a trend. on your question, absolutely. i've been involved in the strategic and economic dialogue since its inception and we talk every time with the chinese about all these issues and i think continued pressure discussion with them about these trade barriers and these related issues i think is very important. very constructive. >> thank you, chairman. >> thank you vice chair brady and, senator sanders. >> thank you, mr. chairman. mr. chairman, as you know, there are people demonstrating against wall street in new york city and other cities around the country and i think the perception on the part of these demonstrators and millions of other americans is that as a result of the greed, the recklessness and the illegal behavior on wall street, we were plunged into this horrendous recession we're currently in. you agree with that assessment? did wall street's greed and recklessness cause this recess
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-- recession that led to so many people losing their jobs? >> excessive risk taking on wall street had a lot to do with it and so did the failure on the part of regulators. >> do you believe that we have made any significant progress since the collapse of wall street to suggest that we will not yield in the short-term or in the longer term once again see a collapse on wall street and the necessity of a bailout? >> senator, yes, we're making substantial progress although i would point out that many of the rules implementing, as you pointed out yourself, many of the rules implementing dodd frank were not enforced or full yimplemented. as this progress -- as this proguess -- >> i would disagree. i get calls in my vermont office every week from people who are paying 25% or 30% interest rates on their credit cards. some would argue that that is usury and yet that is the
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policy of the largest financial institutions in this country. do you believe that if the bank of america, citigroup is charging 30% interest rates that should be prohibited? >> i'd have to know more information, senator. the congress just passed a whole set of rules making -- requiring banks to be much clearer about the information they disclose on credit cards. >> of course. that's correct. >> and on practices as well. >> the bottom line is today, there are people in america, and i think you all deny this, who are being charged 25% or 30% interest rates. congress has passed legislation which has been in affect for many years, limiting the interest rates that credit unions can charge to 15%. credit unions are doing just fine. you can give us any reason why congress should not do the same for the large financial institutions? >> i think as long as there's complete clarity about the
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conditions of the card and people understand what the provisions are, i'm not quite sure what the basis would be. >> what the basis would be is that when people are in bad economic shape, they don't have a whole lot of money, they have to borrow. they have no alternative. and right now with the bank of america and citigroup are charging them 30%. i mean, that seems to me to be outrageous. it seems to me to be usury and it seems to be wrong. and i would urge your support to do what you can to make sure that those outrageous interest rates are done away with. the last point is, picking up on a point i made earlier, i disagree with some of my colleagues here who think that the fed should not continue to focus on unemployment. as i understand it, section 133 of the fed reserve act does allow you to provide emergency loans to any individual
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partnership or corporation under an unusual and exigent circumstances. i would argue that with real unemployment today at 16%, those are unusual circumstances. i believe you do have the emergency authority to provide emergency loans to small businesses so that we can create millions of jobs. would you give some consideration to doing that? >> well, again, i think there are several other provisions besides unusual and exijent. they include, among other things, that the loans be fully secured. you couldn't just give a loan without collateral, for example. >> right. >> and the other problem, is i mean, of course, with banks and financial institutions, we supervise them and we know what their financial condition is and we know that they're solvent when we make them a short-term loan. but we don't have any -- we're not banks. we don't have any capacity to evaluate a small business. why not -- why wouldn't congress consider, if you think that the banking system's not working, why wouldn't congress consider its own provision? >> congress might. but i would just simply suggest
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that during the financial crisis you acted very, very boldly, $16 trillion in revolving loans. i would urge you to try to do the same, give the same line of thought to the unemployment crisis right now. thank you, mr. chairman. >> thank you, senator sanders. representative campbell. >> thanks, mr. chairman. i'll stay on the same two topics i was on before. during 2008 we talked about two big to -- too big to fail but also too interconnected to fail. getting back to the european con tage on. the risk to us is due to interconnectist. i presume of our -- if they had a disorderly, i believe, as you described it, default of greece or some other thing there, is it international financial interconnectist that puts us at risk and if so, is there anything -- obviously not in the short-term, but that we ought to be think being that in the future? obviously it's frustrating to you and frustrating up here as well that here's this thing
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going on over which we have no control. but which could have major impact on us. >> that's part of the issue and there are provisions in the financial reform that penalize interconnectity in various ways and try to force more transparency. but beyond that, as we're seeing in the markets recently, just general pulling back, general risk aversion. we saw in 2008 an enormous impact on emerging market economies that had little direct connection to what was happening in the u.s. in the financial markets. so just the general fear and the general risk aversion would also be a very big effect, even between institutions that were not interconnected in that sense that you're talking about. >> so the concern is almost more psychological or as much psychological as purely economic? >> it's psychological but also in the sense that when there are losses occurring and in a
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panic, people will not know what's stafe, -- safe, what's not safe, and their general reaction is to pull back from everything. >> ok. switching back to housing again, you mentioned about people being able to finance or refinance who were currently under water and in their houses. one of the issues with that, of course, is the regulatory system, that financial institutions have to deal with. do you have any thoughts or suggestions along that line of how you could do that and still maintain compliance with the international regulatory system? >> yes. i think that could be done. if i'm mistaken, i'd be happy to look at it. the key here is if you're refinancing your own loan, one that you made, then you don't have to in some sense underwrite it from scratch. the credit risk is already yours. so the fact that it's an underwater loan, the refinance might actually make it more likely to pay off because the payments would be reduced.
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and maybe it could be combine combined with some kind of -- combined with some kind of equity forgiveness or principle forgiveness that could be worked off as with -- principal forgiveness that could be worked off as well. i'm not aware of any fundamental reason why a bank could not do that on its own loan. >> thank you. >> thank you, representative campbell. we're joined by representative cummings and, representative, we're down to the three-minute drill here but we're willing to extend yours another two minutes. >> thank you very much, mr. chairman. sorry i could not be arblee -- i was ranking on my main committee. i want to thank you for being before the committee today and i thank you for your service. i really mean that. whether the members of this committee agree or disagree with the policies of the federal reserve board, i think we can all agree that you have been tireless and steadfast in your efforts to use the fed's tools to address the extraordinary economic circumstances that continue to
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confront our nation and i thank you. chairman, according to economist mark zandy, housing is ground zero for the economy, for the economy's problems, high unemployment and lost jobs, a recent "wall street journal" editorial said that housing is to the united states what greece is to the euro zone. >> the united states recovery won't gain traction until we deal with the excesses of the past. fromle federal reserve standpoint, you lowered interest rates first, town lock the credit markets, and currently to spur borrow and spending, but as one observer recently stated, regarding your most recent round of bond buying and, i quote, the fed is trying to pump air into a balloon that has a big hole in it and that balloon is called housing, end of quote. mr. chairman, how critical is
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the stabilization of the housing market to our economic recovery and do you believe, mr. chairman, that we are doing enough to stabilize the housing market and end this foreclosure crisis that we're going through? >> you make a very good point. as i discussed in my testimony, housing is very central to the situation we have now. housing is usually a big part of the recovery process and here it's just not doing anything. moreover, you know, many people are underwater, that's affecting them financially, their loss of equity means that they are poor, they are less willing to spend. so addressing the housing situation is very, very important. and indeed as you point out, the fed has done a lot to bring mortgage rates down but it's not very effective if people can't get a mortgage loan. so i think a lot to be done to address the mortgage and housing situation. i mentioned a few things i
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think to mr. campbell earlier. to reiterate quickly, looking at the management of real estate owned by banks or by the g.s.e.'s to make sure that they are maintained, converted to rentals is appropriate, converted to rent to own, avoiding destabilization of neighborhoods from foreclosured houses. helping people who are underwater to refinance. removing unnecessary barriers to mortgage access. there are a whole range of things, of getting fannie mae and freddie mac's future collarified so people can plan and so that maybe the private sector will come back in and provide some more mortgage credit. there are a whole range of things and i'm sure that you and your colleagues have other ideas and i do think that relatively speaking, that what would seem like small measures could actually have a very positive effect on housing and
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for the whole economy. >> would you agree that it's going to be almost impossible to resolve our economic situation when you've got people losing their houses at the rate they're losing them? i mean, would you agree with that? >> i would agree with that, yeah. >> let me ask you one other thing. chairman, do you agree with the director that there is no inherent contradiction between implementing policies that would boost economic growth in the short-term and implementing policies that would impose fiscal restraint several years from now? >> i do agree with that. i mentioned that also in my testimony, that we should be looking simultaneously at long-term consolidation, long-term fiscal stabilization, at the same time trying to think about what actions we should take now to make sure the recovery continues. >> finally, do you believe that given the fragile state of the united states economy, the most prudent course is to implement
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policies now that spare economic growth? and implement fiscal consolidation once the economy has recovered? >> i think you can do them simultaneously. if you have a strong credible plan for consolidating the fiscal situation over the next few years. but also take whatever actions are necessary and i'm not endorsing any specific one, but taking whatever actions are necessary to help the recovery in the near term. >> thank you, mr. chairman. >> thank you, representative cummings. representative burgess. >> thank you, mr. chairman. thank you, chairman bernanke, for staying with us for a second round. let me ask a follow-up to something that was asked a moment ago i think by senator sanders. and it certainly comes up in every town hall that i do back home. you talked about a failure of the financial system and the failure of the regulatory system. if your opinion, why wasn't there a more aggressive effort to find out what went wrong and who was responsible? perhaps even prosecute someone for those failings? >> well, the congress set up a financial crisis inquiry
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commission and it provided a report and that was -- it was -- >> it was pretty ineffective, wasn't it? we had nothing to compare to the 1930's that arguably a lot of people wanted to see. water under the bridge. and i acknowledge that. let me ask you this. when we came up on that august 2 deadline this summer and there was some concern as to whether or not the debt limit would be extended, what was keeping you awake at night then? and did you have any contingency plans that you were putting in place at the fed to deal with the fact that congress might not extend the debt limit? we -- >> we did have contingency plans. the fed is the fiscal agency of the treasury. we are technically responsible for getting the payments done. so we were working on plans on how we would address the situation if the government had to cut back on what it was paying. so we were dealing with that set of issues and we were also
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looking at what we might be able to do to try to reduce the impact on financial markets and on the banking system, but we were quite concerned that the failure of the congress to pass a debt limit in a timely way would create a crisis of confidence in the financial system and we weren't quite sure that we really had tools to address that. >> i don't mean to interrupt. but my time is short. would that crisis of confidence in any way have mirrored or matched the crisis and confidence that occurred after the failure of lehman brothers? >> if there had been a default on u.s. debt, it's possible that would you have had something in the same order of magnitude, yes. >> and did you have tools to deal with that? >> we would have had some tools but we couldn't have prevented a very serious crisis, no. >> well, let me just ask you another question because we are all now focusing on the debt commission. your predecessor in talking to a group of us right before he
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left talked -- a question came up about medicare and the long-term financial sustainability of medicare. the chairman thought for a moment and said, i believe when the time comes congress will make the necessary adjustments and the sustainability of the program, medicare program will continue. he stopped for a minute and then said, what concerns me more is will there be anyone there to deliver the services that you require in that program and that was a pretty powerful statement for him to make. and one that has concerned me in the now five or six years since. one of the things we're looking at in the deficit commission, if the targets are not met one of the rescissions is going to be in the medicare system, not to affect beneficiaries, but likely be on providers which i would argue will ultimately effect beneficiaries, do you have any thoughts or concerns about that? >> well, there's a constraint which is that physicians and hospitals don't have to take medicare patients and so you
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have to pay enough to induce them to do so. which makes me think that the fundamental issue is getting health care costs down and making our health care sector more productive. not just in terms of medicare but in terms of our entire economy. >> and in your opinion is centralized command and control of the health care system the way to do that? >> i'm not going to -- there are lots of different ways to address health care and lots of different models around the world. >> we can discuss that later. >> thank you, representative burgess. representative hinchey. >> thank you, mr. chairman. chairman bernanke, thank you very much for everything you're doing here. it's very interesting. i wanted to mention about unemployment and trade deficit. the u.s. economy has not been able to regain its footing since the near wall street collapse which came about in 2008. and it was initiated prior to that for a number of years. g.d.p. is low, unemployment remains stubbornly high, and we
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are still facing a significant foreclosure crisis across the country. you can respond to how much of a current economic situation is due to the large trade imbalance this country has with china and other countries? and also with the effect of the trade deficits which were put into effect i think in 2007, for the exportation of manufacturing jobs outside of this country into other countries, particularly to china. and also how do you anticipate the current euro zone crisis will affect our already struggling economy? >> as i indicated in an earlier question, i don't have a number on terms of jobs, for example. but i do think that the chinese currency policy, besides creating problems for them in particular, they've dealt with some inflation lately which is a result of their currency policy has been to some extent
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preventing global adjustment. that is, we have a two speed recovery where emerging market economies have been growing very quickly, advanced industrial economies have been growing very slowly. some of the more balanced growth path could be achieved if there was greater flexibility in currencies. china's currency policy not only effects obviously u.s.-china relations but it also effects third party concernsy policies as well. you asked me about europe. we've discussed europe quite a bit. i would press my european colleagues to take strong actions to try to address that problem. i know that they are very concerned about it and they're working hard to try to address it. currently even now we are seeing a lot of volatility in the financial markets which is no doubt a negative influence on the u.s. recovery and unless
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the european situation is brought under control, which i anticipate it will be, but requires still considerable more effort on the part of the europeans, it could be a much more serious situation for the u.s. economy. >> the impact of the reduction in taxes put the movement of manufacturing outside of this country has also had a negative effect. is there anything that you are interested in that about anything? maybe trying to get this changed? a lot of us were opposed to it and voted against it but nevertheless it went into effect. and that has a significant impact on more jobs leaving this country, going to other places. >> i don't have -- i'm not quite sure which specific she you're referring to. >> i'm referring to that tax cut. are you interested in maintaining jobs here in this country rather than in exporting them outside of this country? and by doing so, by changing that tax reduction, eliminating that tax reduction for the
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exportation of jobs outside of this country? >> i certainly can agree that we want to encourage policies that maintain good jobs in the united states. absolutely. >> thank you very much. >> thanks, representative hinchey. representative mulvaney. >> earlier today you said that the committee will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in the context obviously of price stability. give than we're already at zero bound of federal fund rates, you've announcesed dt -- announced the decision and you've announced operation twist. what's left? when you talk about further additional activity, what are the tools you're contemplating? >> i talked about some of them in the humphrey hawkins testimony. generally speaking there's a variety of things under the heading of communication, giving information to the
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public about how long and under what conditions we would hold interest rates low. that's one way of providing more stimulus. of course we could continue to buy securities in the open market would be a second way. a third relatively small step would be to reduce the interest that we pay on the reserves that banks hold with the federal reserve. those are the main directions that i could cite. >> got ya. in the little time i have left, i want to make clear from my earlier comments that i'm not blaming the fed for our inability in congress to work out our fiscal situation. what i'm saying is that as dysfunctional as this body is, and it is, there's no question, the laws of economics still apply to us. and if you participate in a process that allows us to borrow money at less than 2%, which is what our effective rate was last year, i can assure that you we will do it. i've heard those discussions within my own party, within the congress as a whole. why not borrow money, now it's so cheap, you'd be stupid not
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to. and i assure you that there are other moral hazards out there other than just your impact on the banking community. there is a morale hazard as it applies to this institution as well. what effectively the government is facing right now is a teaser rate. we're able to borrow so much money right now at a reduced rate, there's a very strong impetus here to put off the tough decisions for another day. if the interest rates today were at the historical average and the government was playing -- paying 5% on its money, we would be having lot more longer, serious conversations about what to do about this debt that we're having today. but i in no way meant to imply that the fed was responsible for our shortcomings with think a yield back the balance of my time. the speaker pro tempore: thank you, representative. senator lee. >> thank you. mr. bernanke, i want to refer back to something that i understood you to have said earlier which is roughly to the effect that congress not engage in any deep spending cutting activities until such time as
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the economy recovers. ify understood you correctly, i think you were saying that if we engaged in too much deep cutting in the near term future, that might thwart any recovery. first of all, did i understand you correctly? in saying that? was that -- >> i didn't say that quite precisely. what i said was that you can do both. you can take policy actions which are supportive of recovery and that would involve perhaps not doing sharp near term cuts, it might involve other things, other things that might be helpful like in the housing market, for example. at the same time that you provide clarity and a strong and credible plan for achieving fiscal sustainability. those two things are not incompatible. >> ok. so a strong and credible plan, does that imply both spending cuts and tax reform? >> that's up to congress. you can do -- you know, i've
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said often before, i'm in favor of the law of arithmetic. i don't care spending cuts, tax increases, as long as it adds up and as long the policies themselves makes sense. that's what counts. >> but do you have an opinion as to the rate at which that cutting might occur? are you suggesting not to cut more than $1 trillion over the first three years or -- >> no, i don't have specific numbers except to say that i think, as you look at the amount of cuts and somebody mentioned i think maybe senator kasey mentioned $4 trillion over the next decade or so to get stability in the debt to g.d.p. ratio, clearly that's something that can be done with an increasing effect over the decade. there's a fair amount of empirical support for the notion that if you're wanting to help an economy recover but you're also trying to balance the federal budget that there
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are a couple of ways of going about it. one way is to increase taxes, the other way is to cut federal spending. or perhaps a combination of the two. but the empirical evidence tends to support the notion that you'll help the economy recover faster if you focus primarily on cutting expenses rather than on increasing taxes. do you agree with that viewpoint? >> the empirical evidence is very complex. i mean, there's some literature which suggests that a sharp budget -- sharp budget cuts can lead to recovery but that's only in limited circumstances. i don't think that's a general proposition. i think generally you are to look at your tax and spending policies and ask, you know, are these policies doing what we want them to do for our economy? and are the trade offsets -- tradeoffs they engender good tradeoffs for us. >> thank you. >> thank you, senator lee.
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representative cummings. >> on april 13, 2011, the federal reserve board along with the office of the controller of the currency, the office of 2015 supervision and the federal deposit insurance corporation entered a joint report summarizing the results of a horizontal review of the foreclosure practices of the nation's 14 largest mortgage servicers. specifically you found and i quote, critical weaknesses in servicers, end of quote. foreclosure practices, foreclosure document preparation processes and oversight and monitoring of third party venders including foreclosure attorneyies which individually or collectively resulted in unsafe and unsound practices in violations of applicable federal and state law and requirements, end of quote. simultaneously you entered into consent orders with these servicers and third party service providers which required a servicers and providers to take steps to
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correct the problems identified in the review. specifically the banks were required to retain independent firms to conduct a thorough review of foreclosure actions that were pending any time from january 1, 2009, through december 31, 2010, to identify borrowers that had been financially harmed by deficient practices. i understand that the retention of these firms and the process by which these reviews ought to be conducted was required to be spelled out in engagement letters that the regulators have to improve. this is my question. mr. chairman, what is the status of these engagement letters? have all other banks retained their independent firms and spelled out the manner which they are going to identify borrowers who have been harmed by their improper and in many instances illegal practices? and, chairman, how do you respond to the criticism that when the consent orders were released -- well, the primary
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criticism was that they were overly vegas and allowed the servicers to develop their -- vague and allowed the servicers to develop their own programs and correct efficiency going forward. how do you respond to that criticism? which is the methodology that each servicer will use to make sure that looking back, every single harmed borrower in our districts is identified and remediated in going forward, this kind of industrywide breakdown never occurs again? i know that's a lot, but you get the drift. >> well, the engagement letters with the consulting firms and the remediation plans are being developed and being -- they will be carefully reviewed and approved by the supervisor -- >> do we have a time line on that? when we expect that to happen? because people are losing their homes as you well know. >> well, the letters are being reviewed and they'll be -- i think -- it will be very soon but the point is that the process is already under way. the banks are -- the servicers are already reaching out to
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find people who will had problems. in fact, there was something in the paper this morning about that. and they've already made progress in improving their operations and addressing some of the worst abuses. but we will continue to monitor them very carefully. so it's a process that's already begun and we are well advanced in getting the formal agreements completed and reviewed. >> thank you, mr. chairman. >> representative cummings, thank you. mr. chairman, thank youer to your testimony. i just want to note for the record that for members the record will be open for five days, five business days, to submit statements or additional questions in writing and we are adjourned. thank you, mr. chairman. >> thank you, mr. chairman. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011]
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>> government accountability office found that about 170,000 medicare recipients each receive prescriptions for 14 frequently abused medications in 2008. tonight on c-span2, a senate hearing on prescription drug abuse. >> how big is this problem? add up heroin, cocaine sales and a number of other illegal drugs and add them all up and the total is less that is involved in the sale of these controlled substances. it's a big problem. it's a problem that we're beginning to address, we're going to learn a lot more today about how we can further address it. >> seat senate hearing tonight at 8:00 eastern on c-span2. >> tomorrow on "washington journal," colorado democratic congresswoman diana degette on republican spending cuts and the ongoing investigation into
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solindra. and the u.s. and mexico's efforts to fight organized crime in new mexico and central america. and after, that our spotlight on magazines weekly series continues with the executive editor of "scientific american." he'll join us to discuss how cities can be more green in the next four decades, when the world population is expected to top nine billion by 2050. plus, your emails, phone cause and tweets. "washington journal" live wednesday at 7:00 a.m. eastern on c-span. >> congress is back in session this week and the house passed a spending bill that will keep the federal government funded through mid november. and now takes up an e.p.a. bill on hazardous emissions. the senate continues on a bill dealing with china's currency. watch live gavel to gavel house coverage on c-span and the senate on c-span2. and use our comprehensive resource on congress to get more information about your elected officials. elected officials. with
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